Chinese firms tighten grip on energy sector

INCREASINGLY, Chinese companies are eyeing Zimbabwe’s opportunity-packed energy sector with great interest, and those that have been able to get tenders have remarkably excelled.

By Andrew Kunambura

In 2015, for instance, China’s Sino-hydro entered into a deal with government to expand the Kariba South power plant at a cost of US$533 million and three years down the line, the project was completed and has since been commissioned.

The project has added 300 megawatts to the national grid, reducing the national daily power deficit by half.

Before the commissioning of the Kariba South units, the average maximum daily power demand in the country was 1 600MW against an average internal generation capacity of 1 200MW. This resulted in a deficit in supply of 600MW, which is met through importation.

That has now been halved.

That deficit could be cut further upon the completion of units seven and eight of Hwange — again by Sinohydro — whose expansion was launched last month by President Emmerson Mnangagwa.

But at 300MW, the country is still importing far too much power, an irony given that the country has so many opportunities for investment in the energy sector.

On account of that, analysts expect local business specialising in energy production would grab the opportunity and take this lucrative market by storm.

Yet, there has not been any meaningful interest, and the only few ones that have attempted to venture into it have been a fiasco, punctuated by corruption, funds mismanagement and serious incompetence.

For instance, the scandal-ridden Gwanda Solar Power Project whose tender was awarded to convicted fraudster Wicknell Chivayo’s Intrateck company which despite having been paid US$5 million for the project, never really did anything.

The only other project, the Dema diesel power plant which was contracted to Sakunda Holdings, was equally opaque and was decommissioned for reasons of unsustainability.
But in the same field where locals are faring dismally despite the presence of funding, the Chinese are flourishing.

And aside from them, no other country has really invested in Zimbabwe’s energy sector more than the Asians, generally considered to be all-weather friends since relations between Harare and Western powers froze at the turn of the millennium.

Chinese investment in power is diverse. For instance, Chinese-backed China Africa Sunlight Energy has expressed interest in the 600MW coal-fired power plant in Gwayi, western Zimbabwe, after holding talks on financing the project in China during Mnangagwa’s State visit to the Asian nation in April.

Agreements have also been signed with mostly Chinese contractors to build solar and coal power stations that would produce at least 2 000MW, but the deals have been hampered by a lack of financing, which Beijing has promised to deliver.

They are in addition to the Kariba South extension with 300MW and Hwange power station expansion 600MW.

These projects were given a major boost during Mnangagwa’s visit when China Export and Credit Insurance Corporation (Sinosure) by government, decided to cancel a US$60 million Harare owed.

Sinosure is a State-funded insurance group spearheading China’s foreign trade and economic programmes.
The debt had also delayed China Sunlight Energy’s Gwayi project. While these projects have put Zimbabwe well on course to be a major player in the southern regional power pool, with the potential to export excess power to other countries, the failure of local power producers to measure up to their Chinese counterparts which is a cause for concern.

“What has to be understood is that the power sector is capital, knowledge and skills intensive. If you look at all big energy projects that have been done all over Africa, they contractors are reputable firms with big financiers behind them and the funds are closely monitored,” said Zimbabwe Energy Council executive director Panganai Sithole.

“You take the example of Intratek and Sakunda which are wholly owned local companies, they did not have the experience to do those jobs and they did not have a record of doing even a one megawatt job, yet they jumped to give them 100 megawatt projects. It’s an incredible impossibility. You need big companies with a track record and the backing of financial institutions such as the IMF, World Bank and the African Development Bank.

“The truths is that those people do not have the capacity to do those jobs. If they have the capacity, we should see them also bidding for tenders on the continent. For instance, Botswana recently invited bids for a 50MW project and we never saw them bidding for that tender. This is evidence of their incapacity.”

Despite all the failures, government still awards them the contracts, often without going to tender as was the case with Sakunda’s ill-fated Dema diesel power plant.

Another energy expert Charles Murove believes that the deals smack of corruption.

“It’s a well-document problem in our energy sector. Everything that has been happening there is not transparent and where there is no transparency, corruption festers.
“We need to relook at the entire energy structure and realign it in terms of the energy policy to, for instance, follow international best practices in managing power utilities. But government is muzzling that debate.”